Overview of Sme in Bangladesh

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THE SMALL AND MEDIUM ENTERPRISES
(SME) IN BANGLADESH: AN OVERVIEW OF
THE CURRENT STATUS

DR. MOMTAZ UDDIN AHMED
VICE CHANCELLOR
STATE UNIVERSITY OF BANGLADESH

1.0

The Case for the SMEs

The SMEs1 worldwide are recognized as engines of economic growth. The commonly perceived merits often emphasized for their promotion especially in the developing countries like Bangladesh include their relatively high labour intensity, dependence on indigenous skills and technology, contributions to entrepreneurship development and innovativeness and growth of industrial linkages. The case for fostering SME growth in Bangladesh is irrefutable as these industries offer bright prospects for creating large-scale employment and income earning opportunities at relatively low cost for the un-and unemployed especially in the rural areas strengthening the efforts towards achieving high and sustained economic growth which are critically important prerequisites for triggering an exit from endemic poverty and socio-economic deprivation.

These promotional arguments for the SMEs, while universally emphasized are often put forward by their ardent advocates in a small versus large context and thus arouse serious debates concerning their economic viability. Much of such controversies may, however breakdown if the intrinsic virtues specific to SMEs and unavailable to large-scale industries are correctly identified and carefully exploited. A combined interaction of the forces of product-mix, locational factors, technological advantages and market advantages create opportunities for SMEs to grow and prosper at all levels of development which are often ignored by the traditional approach to their economic strengths and development potentials. The growing economic significance of the SMEs as sources of new business creation and employment generation in the developed, OECD countries especially since 1970s is now widely recognized in an increasingly growing volume of literature (OECD1997). The recent structural shifts in industrial production from the Fordist approach of mass production to more flexible and adaptable production regime in response to constantly changing market opportunities have led to a notable resurgence of these industries in the West. The re-emergence of the SMEs in the developed world makes economic case for fostering development of these industries more stronger than ever before.

1

Following the industrial Policy 1999 (IP- 1999), “Small Industries” are defined as industrial enterprises employing less than 50 workers and/or having a fixed capital investment of less than Tk. 100 million “Medium industry” covers enterprises employing between 50 and 99 workers and/or having a fixed capital investment between Tk. 100 and 300 million. “Cottage Industry” covers household-based industrial units operated mainly with family labour.

2

2.0

Place of SMEs in the National Economy of Bangladesh
Any precise quantitative estimate of the importance of SMEs in Bangladesh economy is precluded by non-availability of comprehensive statistical information about these industries at the national level.

The latest BSCIC estimates suggest that there are currently 55,916 small industries and 511,612 cottage industries excluding handlooms. Including handlooms, the number of cottage units shoots upto 600,000 units indicating numerical superabundance of the SCIs in Bangladesh. Quoting informal Planning Commission estimates, the SMDF puts the number of medium enterprises (undefined) to be around 20,000 and that of SCIs to be between 100,000 to 150,000. This wide variation in the BSCIC and Planning Commission estimates of the numerical, size of the SMEs might be due to at least two reasons: (a) different set of definitions of the SMEs and (b) different coverage of SME families. This strongly suggests the need for adopting and using an uniform set of definitions for SMEs by all Government agencies to help formulation of pro-active SME...
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